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Recession delivers a double blow to many charities

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DAVID CRARY
September 30, 2009
— For many social-service charities across America, the recession has delivered a staggering one-two punch. Sharp drops in donations and investment income have been coupled by soaring demand for their services.

The casualties so far include countless needy clients losing assistance and thousands of nonprofit workers who've been laid off. Some local charities have shut down; even many of the largest nationwide operations have made painful cutbacks in staff, spending and programs.


"Nonprofits are generally at the whim of the economy ... but we've never seen anything like this," says the Rev. Larry Snyder, president of Catholic Charities USA. "Increasing numbers of our own volunteers and employees have been forced to become clients of our services."


The cutbacks are forcing charities to rethink how they operate and make changes that are likely to outlive the recession. Nonprofits, like regular businesses, are learning to do more with less. Those that survive will emerge more efficient.


"It gives you a mindset to be more creative," American Heart Association CEO Nancy Brown says. "We're thinking even better and more innovatively than we were 10 months ago."


Numbers help illustrate the magnitude of the challenges.


Giving to social-service charities fell by 12.7 percent in 2008, according to the Giving USA Foundation, and there's been little evidence of a resurgence so far this year. Simultaneously, many state and local governments are cutting back on funding for nonprofits or delaying payments as they struggle to assemble their budgets.


That double hit to charities' revenue comes at a time when the national poverty rate has reached an 11-year high of 13.2 percent.


Nonprofit officials hope giving levels will rise once the recession ends, but for now many are thinking hard about how to use their dwindling resources.


"We can't be in recession there are too many people relying on us," Brown says.


Brown's organization laid off 371 staff members across its national affiliates 10.5 percent of its work force and chose not to fill more than 200 vacant positions. To save money, it's cut travel costs and promoted resource-sharing among its affiliates.


World Vision, which aids disadvantaged children and families worldwide, has intensified efforts to thank donors and enable them, through high-tech improvements, to keep track of how their donations are used.


And some local Salvation Army branches resorted to deploying their red kettles normally reserved for the Christmas season to raise money in July.


"This is the most financially challenging period of time we've had," says Major George Hood of the Salvation Army, who was among the national officials who opposed that move yet understood it because of the branches' desperate financial situation. "We're committed to doing whatever it takes to get the job done."


The American Red Cross in Greater New York cut its staff from 186 to 145 earlier this year as private donations fell by 25 percent. Leaders of the chapter insist that emergency response operations will not be affected, but say they will spend fewer resources on planning for future disasters.


The chapter, like many across the Red Cross system, has always made extensive use of volunteers, and is now relying on them even more, spokeswoman Marianne Darlak says.


Nationally, the picture regarding volunteering is mixed. Many nonprofits report a surge of volunteers, including recently laid-off people looking for meaningful tasks. Yet according to a report last month by the National Conference on Citizenship, based on surveys of 3,889 people, 72 percent of Americans have cut back the time they spend volunteering and performing other civic activities largely because of the recession.


Some charities are examining their priorities and scaling back. CARE, one of the biggest U.S.-based international aid organizations, is now focusing on empowering impoverished women. Its headquarters staff has been reduced by 43, and the remaining 255 employees saw their pay cut.


"Absolutely, it's a very useful process to rethink and prioritize," says Kymberly Wolff, CARE's senior vice president for resource development. "What many nonprofits do is become very scattered, trying to do all things for all people. This crisis has forced us to become very strategic, and concentrate on serving those who need us the most."


Some once-flourishing local charities have been unable to survive. Family Services of the Mid-South, a 115-year-old nonprofit, is closing this week after transferring a few of its programs to other agencies. The Destiny Foundation of Central Florida, which ran a children's clinic, thrift store and food pantry in Orlando, has suspended its operations and may close.


A recent survey by the Human Services Council of New York City, encompassing 244 local nonprofits, found that 60 percent had seen some decrease in public funding and 73 percent reported reductions in private donations. More than half had laid off staff in the past year, and 35 percent had eliminated programs.


One of the city's oldest and largest charities the Brooklyn Bureau of Community Service has laid off about 50 of its 550 employees. It's also eliminated a program that helped disabled people make the transition from welfare to work, and scaled down a program that's helping kids from troubled homes avoid foster care.


Reductions in both donations and city funding were to blame, says executive director Alan Goodman.


"It's like being nibbled to death by ducks a little here, a little there," he says. "The end result is we have less money and fewer staff."


Goodman says becoming "leaner and meaner" is of limited consolation when he looks at the big picture and wonders if more government support is needed to rescue the charitable sector.


"You'll find a whole lot of smaller nonprofits will just go out of business totally wiped off the face of the map," he says. "Some of the most robust ones will weather the storm, but I don't think anyone will come through it unscathed."



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